Goldberg v. Federal Trade Commission.

HASTINGS, Chief Judge: This is a petition to review and set aside an order of the Federal Trade Commission requiring petitioner, Max H. Goldberg, trading under the name of Novel Company, to cease and desist from the sale or distribution of merchandise by means of a lottery scheme in violation of the Federal Trade Commission Act, 15 U.S.C.A. § 45, et seq.*fn1

The Commission's complaint, filed January 14, 1959, charged petitioner (respondent below) in substance with selling and distributing merchandise in interstate commerce and that in so doing he furnished push cards to be used in the sale of such merchandise to the public by means of chance and lottery. Petitioner answered the complaint, admitted his identity and denied generally the other allegations.

Following a hearing held before an examiner, an initial decision was rendered on June 5, 1959, in which detailed findings of fact were luded there was a violation of the Federal Trade Commission Act and entered a provisional order to cease and desist; petitioner appealed to the Commission.

Upon consideration of briefs and oral argument, on November 23, 1959, the Commission denied the appeal and adopted the examiner's decision and order. That part of the order we are asked to review directs petitioner, in connection with the offering for sale, sale or distribution of any merchandise in commerce, forthwith to cease and desist from:

"1. Supplying to or placing in the hands of others pull cards, push cards or other lottery devices, either with merchandise or separately, which are designed or intended to be used in the sale or distribution of respondent's merchandise to the public by means of a game of chance, gift enterprise or lottery scheme.

"2. Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme."

Petitioner acknowledges that the findings of fact are not disputed and that there is no conflict in the evidence. The following relevant facts are well established.

Petitioner's place of business is in Chicago, Illinois, from which he sells and distributes through interstate commerce dolls, clocks, electric appliances and other items of merchandise by means of push cards, resulting in sales of about $500,000 annually. He mails the push cards to operators and to members of the public with pertinent literature and instructions explaining the lottery scheme. The prospective customers may sell chances from the cards and remit the proceeds to petitioner, who then mails the merchandise called for by the particular cards.

The scheme is described fully in the findings of fact and need not be detailed here. It is a typical push card lottery-merchandising operation. It is essentially similar on the facts to numerous other cases considered in the past by the Commission and the courts.

Petitioner advances two basic arguments in seeking to set aside the order of the Commission. He first contends that the Commission does not have jurisdiction to prohibit the mailing of push cards in interstate commerce and that his mail order business does not violate the Federal Trade Commission Act. He further asserts that his business operation is not contrary to the established public policy of the United States. Each of these arguments has been previously considered and rejected by the courts.

"Under § 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45, 'unfair or deceptive acts or practices in commerce, are declared unlawful' and the Federal Trade Commission is thereby empowered to prevent the use thereof. The law is now firmly established that the practice of selling goods by means which involve a game of chance, gift enterprise or lottery, including push cards such as we have here, is contrary to the established public policy of the United States and the sale and distribution, in interstate commerce, of such devices designed for the purpose of selling merchandise by games of chance or lottery is violative of the Federal Trade Commission Act."*fn2

The landmark case is Federal Trade Commission v. R.F. Keppel & Bro., Inc., 291 U.S. 304 (1934). There the Supreme Court condemned a merchandising operation that "employs a device whereby the amount of the return they receive from the expenditure of money is made to depend upon chance." Id. at 313. It held that the practice was an unfair method of competition within the meaning of the statute and was of the sort deemed contrary to public policy. Petitioner contends that the holding in Keppel is limited to its facts and that from the holding no "established public policy" can be said to be ...

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